Comment by zzleeper | Hacker News Reader

Comment by zzleeper | Hacker News Reader

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It is instituted. I work at the Fed in a relatively junior role.

I can't buy bank stock, or for any practical purposes any financial firm stock (or bonds). I can't buy funds finance-focused mutual funds or any kind. I can't buy stocks of any firm where I have any sort of insider trading, such as contractors.

Lastly, there's a window around FOMC meetings where anyone with any sort of insider knowledge is prohibited to trade at all.

But last I checked on my Robinhood account, I do own some GitLab, Cloudflare, etc. firms that I think are doing quite well compared to their current market prices. And that's mostly based on what I read (HN, etc).

The question is, should employees be disallowed to own stocks at all? (Right now this rule is aimed at officers, but officers are like 20% of the number of employees of my division, so it's still a lot). I would say doing so makes it quite more difficult for economists to take jobs at the Fed, where the salary is not as competitive as in other places such as the private sector (and already all the friends in my PhD Finance cohort earn more than I do..). To make a parallel, imagine that working at Google prohibits you from owning stocks at any firm that trades/buys/sells/interacts with Google or its competitors.

Fellow economist here… I would have thought this rule would be irrelevant to us! I don’t think most of us think we can beat the market. I hold index funds only. (To be clear: I think this rule is a good idea and should apply to anyone with any serious role there. I’m just a little surprised it’s binding on anyone.)

Edit: clicked on your profile. Thanks for writing reghdfe. I use it with some coauthors on a project on healthcare now.

It is hilarious that well-studied economists understand that it is difficult and unlikely to consistently beat market returns when using any decent size, yet a primary purpose of the Fed is explicitly to manipulate interest rates.

We would get more value, and much cheaper, by simply using a formula for money expansion and the resulting interest rate.

TBH 99% or more of what I hold is index funds. I started playing with Robinhood when trying to understand what was going on in the retail market (May 2021). On the other hand, I do think that from time to time you can get an insight that the rest of the market hasn't picked up.

About reghdfe, you are welcome! I wrote it because the server for my PhD thesis was a piece of crap, but it kinda found a life on its own!

The point of the regulation is that it would stop an economist (or anyone) from trading with non-public information.

And it would be perfectly rational for an economist (or someone else) to trade a single stock if they had non-public information and there was no downside. Right now the downsides (it’s unethical / a gray area but depending on one’s position not always illegal) are not fully baking in the costs to society (e.g. a trader with non-public knowledge can get ahead of the broader market, impacting the ability to have a “fair” market and increasing costs for other investors).

I strongly believe that policy makers need to be indexed with broad exposure across, at a minimum, industry sectors but more preferably the US economy (or a state’s economy if they are a state representative). There is too much room for misaligned incentives (buy our depressed stock, pass this bill, make a couple million) that should be removed.

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